Speaking to CNBC-TV18 on the acquisition of the Rs 100 crore company, Prasad says the deal has been funded by a mix of accruals and debt.
"The API market is also good and there is a big customer list for products in this company. I think from about Rs 140 crore revenue this year, Rs 250-350 year going is not a problem, they can do about 40-50 percent growth in this unit every year," he adds.
Below is the edited transcript of Prasad's interview to CNBC-TV18.
Q: Could you tell us how are you planning to fund this Rs 120 crore?
A: It is going to be a mix of internal accruals and debt.
Q: Can you give us a breakup, how much internals, how much debt and once you take on this debt, what will be the total debt on the books?
A: The debt is around Rs 140 crore today. It is a long-term debt and of course there is working capital which we don't count because it is backed up by the current assets and the debt equity is about Rs 121.
Q: Can you take us through what does this acquisition mean for you, why you are going for it in the first place, how will it add to your synergies?
A: The acquisition is a part of our strategies and normal growth plans. We had about four products and we are leaders in some of these. We have always been saying that we will keep on adding three-four products every year and the growth is going to be in the Finished Dosages. For these Finished Dosages, we need a secure supply of Active Pharmaceutical Ingredients (APIs).
If one sees Granules, it has always been an integrated manufacturer right from APIs to Finished Dosages and that is what has given us a strength. At the same time, instead of setting up an API plant today for making APIs and waiting for the Food and Drug Administration (FDA) approvals, we thought it is a quick way to start filing of our Abbreviated New Drug Applications (ANDAs).
Q: You are paying Rs 120 crore for company which has revenues of about Rs 100 crore, would this be EPS dilutive at least in the first couple of years?
A: What is being produced today is that Rs 100 crore, but the plant is capable of doing much more and we have a very good operational excellence programme in our company which has been proven. We have got excellent results and we are sure our team can unlock the potential of this unit and it is definitely capable of doing much more.
Q: At least in the near-term, could you tell us for FY15 what it will mean on a consolidated basis what the revenues and the margins of the companies will look like?
A: The real potential of this exhibition will be may be 3-4 years from today, once our ANDAs are approved but meanwhile they would be a good addition, the API market is also good and that is a big customer list for products in this company. I think from about Rs 140 crore this year, Rs 250-350 year on going is not a problem, they can do about 40-50 percent growth in this unit every year.
On November 05, 2013, Granules India closed at Rs 178.20, up Rs 3.35, or 1.92 percent. The 52-week high of the share was Rs 191.20 and the 52-week low was Rs 90.15.
The company's trailing 12-month (TTM) EPS was at Rs 23.94 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 7.44. The latest book value of the company is Rs 133.59 per share. At current value, the price-to-book value of the company was 1.33.
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